Recession 2022: Outsource or not

Vladlen Shulepov posted on Aug 30, 2022

A recession, like earthquakes, floods, tornadoes, and bushfires, is unavoidable in business. This hiccup should not be viewed as negative because it pushes business founders to be smarter and more strategic in their operations.

Selective outsourcing allows you to develop more adaptable expenses in a changing economy. It enables you to refocus and pay close attention to your company’s resources. Further, assisting you in scaling your operations and preparing for what lies ahead, whether a financial crisis or an economic downturn.

 

Introduction

Turning a corner without coming across predictions of an American recession is difficult. Big banks, prominent economists, and former officials are all predicting a downturn as the Federal Reserve struggles to keep inflation under control. Three-quarters of Fortune 500 CEOs anticipate negative growth before the end of 2023. Bond yields and consumer sentiment are both flashing red.

Google searches for “recession” are at an all-time high.

The track record is unsettling. According to former Treasury Secretary Larry Summers, whenever inflation has risen above 4% and unemployment has fallen below 4%—two thresholds that, when crossed, indicate economic overheating—the world has experienced a two-year recession. It has now crossed both thresholds.

But let’s start with the meaning of recession, which affects companies from all industries such as healthcare, fintech, and others.

Simply put, a recession is a period in the business cycle in which economic activity falls significantly. When the economy of a country is experiencing:

  • Unemployment is increasing.
  • Gross Domestic Product (GDP) is negative (GDP)
  • Several business failures
  • Income indicators are declining.
  • Stock markets are collapsing.

Nonetheless, a recession is considered normal in the economy and business cycle.

 

What is the connection between outsourcing and the recession?

Before the COVID-19 Global Pandemic, the world experienced the Global Recession from 2007 to 2009. Some iconic brands, such as IBM, Apple, and Cisco, were impacted, but many startup tech companies went out of business.

 

A recession may be unpleasant, but it provides opportunities for entrepreneurs to innovate in the long run. Outsourcing is a popular innovation that businesses of all sizes are embracing.

If you hire staff – Front- and backend engineers, QA specialists, or DevOps- you need today, the company has two options. You can put your immediate activities on the back and start looking for, training, and managing new employees, or you can outsource.

Outsourcing software development to remote teams does more than just assist with adapting to new ways of working. Discover the top benefits of hiring a software outsourcing company below.

 

Outsource to survive during the recession

Outsourcing allows you to gain flexibility and efficiency while eliminating the burden of hiring talent. Since then, more businesses have used outsourcing services. Remote and offshore software development trends were emerging. According to the most recent Upwork report, 73% of teams will have remote workers by 2028. This figure is likely to be even higher today. 

 

Spend low cost on development

During a crisis, many businesses must cut costs, which unfortunately means layoffs and a severe shortage of workforce and talent. Outsourcing critical tasks allow you to manage capital with greater flexibility and measure and reallocate money anytime. This meticulous, adaptable budgeting level is essential for achieving positive ROI and saving valuable resources in difficult times.

Despite being critical to business needs, 59% of outsourcers admit that an outsourcing strategy is primarily implemented to cut costs. The reason is obvious. According to Glassdoor, the average backend engineer salary in California, US, is 124 thousand dollars.

Some may be hesitant to outsource during an economic downturn. However, it may assist the company in being better prepared in an economic downturn. The company must implement change as a result of the recession.

 


Improve project management and increase oversight

Because of regular reports and frequent formal meetings with the contractor, management can pay close attention to a project step by step when it is outsourced. Touching base frequently aids in determining the direction of future investments and developments, thereby avoiding wasted time and money. Simultaneously, the company develops trust and familiarity with new methods and technology.

 


Focus on critical tasks and risk management

Make sure you hire a software outsourcing firm that operates with complete transparency and can justify all of its decisions and requirements. The Agile methodology’s Scrum approach is a must-have in today’s IT technology teams. 

Remote software development becomes more efficient when you understand how to use outsourcing transparency for risk management. You can evaluate each stage of the work and collaborate to find lower-risk solutions. Another factor contributing to reducing business risks is the accumulation of technical expertise. Software vendors specializing in tech products are up to date on the latest technological advancements and can provide valuable advice to businesses.

 

Simplify the method for resolving capacity issues.

For example, it could be a startup that creates medical management software in high demand. This company now requires additional resources to focus on product development and rapidly scale. Again, the remote management team can provide the required capacity and meet the software development demand that the company cannot meet on its own.

Enjoy the simplest method for resolving capacity issues.

For example, it could be a startup that develops medical management software in high demand. This company now requires additional resources to focus on product development and rapidly scale. Again, the remote management team can provide the necessary capacity and cover the software development demand that the company cannot meet on its own.

 

Unite experts in your team

In difficult economic times, businesses risk assigning critical tasks to the wrong person already employed by the organization to save money. However, entrusting an important project to someone lacking experience could be costly.

Using an outsourcing company, you can quickly find the right specialist for the job without hiring someone full-time. Engineers already fully competent in the tasks at hand do not require ongoing assistance from your end. Outsourcing companies handle day-to-day supervision and bring consultants up to speed, saving you time on management and training.

 


Less time for on-site interviews and onboarding

Even though unemployment may reach 32%, the tech industry is relatively stable. Of course, it is affected by the pandemic, but much less so than others. Although the number of IT job postings has decreased by 16%, the massive layoff is unlikely to begin. As a result, competition for qualified developers, quality assurance engineers, and other tech-related specialists remains fierce. Aside from that, in today’s market, people are unlikely to willingly leave their jobs, begin the round of job interviews, and switch their beloved teams for unknown guys they see on Zoom.

As a result, the search will be time-consuming if a company requires several professional developers. If you look for a remote team globally, you will significantly rev the hiring process, and software development will start.

 

Keep R&D from stagnating.

In times of crisis, spending and investment must be prioritized. Intuitively, management begins by reducing the outsourcing budget when outsourcing provides businesses with the same opportunity they require to progress on limited resources.

Companies can cut costs while developing the next generation of products by outsourcing R&D efforts when competitors are reconsidering R&D plans. When the market improves, a company that has protected its share while investing in innovations may find itself in a better position.

Outsourcing can also help a company save money and increase budget flexibility without sacrificing productivity or innovation. When a project is completed, you will not need to assign a new task to a full-time employee. Instead, you can hire experts on an as-needed basis to achieve competitive superiority without planning the next step for a team member after the project is completed. Investing in projects where you can track actual results with reasonable expectations is critical.
 
 

Conclusion

Companies can and must seek out alternative business models during a recession. Organizations can postpone payments and work out creative solutions with outsourcing companies to deal with budget restrictions if necessary. In times of scarcity, businesses can allocate funds most efficiently to the best possible purpose.

When a recession hits, outsourcing could be a steady platform that keeps your company on solid ground. Outsourcing low-value tasks to important company departments is a cost-effective and advantageous option for almost all businesses. 

To summarize, assisting your company in surviving a recession is difficult but not impossible. So, the next time the economy struggles, arm yourself with the correct principles! Create several backup plans and be prepared for the future based on the changing landscape.

Now is the best time to make the most significant investment in your company!
 
 

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